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GRC Professional : GRC Summer 2013
12 GRC Professional • Summer 2013 LESSONS LEARNED IT'S THIS HISTORY THAT JUSTICE Richard Tracey took into account when deciding the size of the penalty --- the highest ever fine for these kinds of breaches in Australian retailing --- and consequent remedies in the Federal Court in Victoria before Christmas. The Australian Competition and Consumer Commission (ACCC) brought the action for breaches in 2010 of the Trade Practices Act 1974. Justice Tracey, could have charged the company a maximum $10 million but decided $1 million ($400,000 for selling more than 1000 nightdresses that breached Australian fire safety standards, $400,000 for selling more than 1000 unsafe pairs of girls' pyjamas between September a nd December 2010, and $200,000 for false and misleading labels on both sets of clothing items which claimed they were "low fire danger") was a big enough deterrent when combined with a mandatory, stringent and comprehensive compliance and risk management regime requiring proof of undertaking to the ACCC at regular intervals, with repercussions if it failed to do so. In summing up the repeated safety failures by the company (a subsidiar y of Cotton on Clothing Pty Ltd) Justice Tracey considered the fact that Cotton On had co-operated with the ACCC in voluntarily issuing recall notices about the flammable nightwear. He also noted that both the ACCC and Cotton On were in agreement that the contraventions were the product of inadequate compliance procedures and poor super vision rather than any deliberate attempt to supply children's nightwear in breach of the Act. "Responsibility for ensuring compliance with relevant safety standards and the Act rested on senior managers of the respondents," he said in his judgment. Uncommunicative As has been the case with previous compliance and safety failures, Cotton On has said little when pulled up over breaches. Other than advertising product recalls, making unsourced and carefully worded short statements and, in the latest instance, putting a Q&A explanation of the ACCC action on its website, its m anagement have not stepped up to the plate to explain why they had not implemented an effective safety and compliance regime. Following the nightwear judgment, the company said in a statement that when the issue wa s brought to its attention in November 2010, "Cotton On has worked diligently to address the concerns raised by the ACCC in this case." It said it took the safety of its products very seriously, had further invested in its team to monitor "the safety and compliance of our They manifestly failed to perform this important aspect of their duties. The potential consequences were most serious. This is a factor which weighs in favour of a significant penalty. Legacy of non-compliance catches up with Cotton On The hefty $1 million fine handed down to Cotton On Kids Pty Ltd for selling highly flammable children's nightdresses and pyjamas in Australia, labelled as "low fire danger" has largely overshadowed a history of non-compliance by the retailer. BY DENISE MCNA BB
GRC Spring 2012
GRC Autumn 2013